SSBCI

The State Small Business Credit Initiative: Here’s What You Need to Know

The Hartford

Transcript

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Gene (00:02):

Hey everybody, this is Gene Marks and welcome to this week’s edition of The Hartford’s Small Biz Ahead podcast. Thanks for joining me. By the way, if you want any advice or insights or help in running your business, please visit us at SmallBizAhead.com, that’s SmallBizAhead.com or SBA.TheHartford.com. And let’s get to the topic at hand. And the topic is a big one for you, if you’re running a small business. It has to do with federal funding that it is available for you. Now, listen, very recently the Senate unfortunately rejected legislation that could have potentially provided small businesses, particularly restaurants with as much as 48 billion dollars of additional aid to help them recover from the pandemic. So, a lot of people are saying, is this it? Is this the end of federal aid? The Paycheck Protection Program and the Economic Injury Disaster Loan programs are both expired.

Gene (00:56):

It seems like there’s no more money coming from the federal government to help small businesses. So is that it? And the answer to that question is no. In fact, just these past couple weeks there has been the launching of a new program. Well, let’s say it’s a version 2.0 of a program that’s called The State Small Business Credit Initiative or SSBCI from the federal government. And this is what you gotta know about it. It is 10 billion dollars of new money that the federal government is making available to small businesses across the country in the form of either loans at market or below market rates or grants for your business or equity investments as well. 10 billion dollars in my area where I live in Philadelphia, it’s more than half a billion dollars. What it’s done is it was divided up among all the states based on their employment and other factors.

Gene (01:57):

And the money itself is being distributed to the states as well. This is money for you to take advantage of. Now, let’s just make sure that we’re clear on some of the facts. It’s federally backed. All right. So like I said, 10 billion dollars has been made available. It’s really an extension of a prior program, which I’ll talk about in a minute, but let me explain to you what this SSBCI is, or State Small Business Credit Initiative. It’s a program where the U.S. Treasury Department distributes money to the states who then turn around and distribute the money to local lending and financing organizations. Things like community development financial institutions, CDFIs, or community banks or minority depository institutions, as well as investors and other non-profits that are focused on economic development. This money is being distributed to all of these organizations in order to help like local small businesses get access to capital that they otherwise wouldn’t…

Gene (02:58):

Have been able to access. Now, a little history here, back in 2011, more than a billion and a half dollars were issued through this program. This is not a new program. And that aid was like snapped up really quick by entrepreneurs across the country. This new program, which was signed into law over a year ago, March of 2021. And the funding is now just coming out. It was part of the American Rescue Plan Act. It reauthorized the original program and instead of a billion and a half dollars being available to small businesses, 10 billion dollars has been made available. All the money has not been distributed yet. There’s still some back and forth in Washington around timing and finalized amounts. But I spoke to representatives at the treasury department. They tell me that the funds just are rolling out soon, this summer to the states and then from the states to participating community organizations.

Gene (03:52):

This program is gonna provide funding for organizations which like yours, which you may not been able to get funding like this before and the money’s gonna be going out through these community reinvestment type of organizations, financing firms who better understand the business owners in their local areas. The question is, where do you go to get this money? Well, first I want you to just be careful about what kind of money that you want. Again, there are loans available for you. There are grants available for you. There are even equity investments in your business available for you. The best thing that you should be doing is you should be Googling SSBCI and your state or State Small Business Credit Initiative and your state.

Gene (04:40):

And that will immediately start giving you some resources in your state to find where you can reach out. These are organizations getting this money. The other place you might wanna try is The Council of Development Finance Agencies State Resource’s map. I know it’s a big one. Their website is CDFA.net. Look for their state resources map. These are all of these different finance agencies around the country. They’re gonna be getting these state funds, which came from the federal government. And these organizations are looking to turn around and lend these monies out or invest this money in businesses in their local areas. Now, remember, these are not traditional loans. This money can be used for venture capital programs where investments will be made in like startups and other early stage companies. Some will be in loan participation programs where like an organization buys an interest in the loans made by a traditional banker or by a private lender. The money can be used to guarantee loans that are given by banks as well. They can be used to help you with collateral if you don’t have enough collateral for a loan with a traditional bank and also capital access. I mean, it’ll provide insurance and capital funds for you. So you wanna look for…

Gene (05:56):

Companies in your area, again, community bankers, CDFIs, minority depository institutions or just nonprofits that do economic development in your area. They’re the ones that are getting the money, right? And they’re the ones that wanna turn out and lend this out. Now, the other thing, I just wanna make sure that there’s, sometimes there’s a misconception. This is not like a minority interest thing. Minority businesses will certainly get some preferences in some of these programs but really all businesses are open for getting this kind of help. The idea of this money is to fund businesses that otherwise wouldn’t get traditional funding and of course help you hire people and create more jobs. So because of that, the financing requirements are less stringent than the requirements of a traditional bank loan.

Gene (06:46):

Interest rates may be lower than market rates. The money can be used from working capital to inventory to equipment purchases and yeah, some minority business owners and establishments located in like lower economic income areas will be given priority in some cases but not in all cases. It’s certainly gonna be up for any businesses to do it. So, here’s my advice. This money’s rolling out. You need to establish relationships with these organizations now. Call them, visit them, get to know them, just as importantly, so that they can also get to know you and your business, and you can get to know what kind of organization they are. Start building these relationships now, ahead of when the money becomes readily available. Their job is to get the financing out the door to businesses that need it, and you wanna be on the top of their list. But you know, this doesn’t happen overnight. So, the application process is kind of complex. So, you gotta ask them about different funding options and provide to them whatever documentation they require in advance, like tax returns or historical financials or contracts or other paperworks. Start the application process now. It’s a good time to talk to your accountant or a business advisor. Start reaching out to the entities that are gonna distribute these funds. You wanna be high on their minds.

Gene (08:04):

So remember the program, SSBCI, State Small Business Credit Initiative, 10 billion dollars becoming available for businesses across the country, from the federal government to the states, to your local organizations that lend that money out. Money’s available for you to do and take advantage of. So I strongly recommend that you start reaching out to these companies now and check it out. Particularly if you’ve had a hard time getting financing in the past. Hope this information helps. By the way, more information about SSBCIs and other advice and tips to help you run your business is on The Hartford’s site Small Biz Ahead, SmallBizAhead.com or SBA.TheHartford.com. My name is Gene Marks. Thanks for listening. I hope this information helps you run your business or finance your business. I’ll be back to you next week with some other thoughts and advice to help you run your company. Thanks again. Talk to you soon.

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